Business

Former KPMG executives charged in accounting oversight scam

WASHINGTON, United States (AFP) — US authorities on Monday charged six accountants, including former partners from “big four” global auditor KPMG, with using stolen information to cheat on inspections for corporate audits.

The charges follow KPMG's decision last year to fire five former partners, including the head of its audit practice, after the company improperly learned which audits government regulators planned to review.

Federal prosecutors said the scheme was a fraudulent attempt to interfere with inspections by the Public Company Accounting Oversight Board (PCAOB), a regulator created in the wake of Enron-era corporate accounting scandals in 2002.

US authorities charged the six with fraud and conspiracy. They include three former accountants in KPMG's national office and three former PCAOB employees.

Steve Peikin, of the Securities and Exchange Commission (SEC), told reporters the defendants' behaviour was “shocking and serious”.

“We allege that this misconduct was motivated by the fact that KPMG had experienced a high and increasing rate of PCAOB audit deficiency findings and had made it a priority to improve its results,” he said.

Officials did not identify the company or companies under audit by KPMG but said the audits in question, while imperfect, did not pose a danger to the investing public.

KPMG is among a group of global accountancies, including Ernst & Young, PwC and Deloitte, which dominate the global auditing industry for major corporations.

Their audits act as assurance for investors that company financial results are accurate.

One of the defendants, Brian Sweet, a former PCAOB official later hired by KPMG, has pleaded guilty, the US attorney's office in Manhattan told AFP.

Despite the charges, SEC Chairman Jay Clayton said he believed companies and the investing public could continue to rely on KPMG.

“I do not expect that these actions will adversely affect the orderly flow of financial information to investors and the US capital markets, including the filing of audited financial statements with the commission,” he said in a statement.

In August, KPMG agreed to pay US$6.2 million to settle SEC charges that its audit of the oil and gas company Miller Energy Resources had left investors “misinformed” about the company's value.

ADVERTISEMENT

POST A COMMENT

HOUSE RULES

1. We welcome reader comments on the top stories of the day. Some comments may be republished on the website
or in the newspaper � email addresses will not be published.

2. Please understand that comments are moderated and it is not always possible to publish all that have been
submitted. We will, however, try to publish comments that are representative of all received.

3. We ask that comments are civil and free of libellous or hateful material. Also please stick to the topic
under discussion.

4. Please do not write in block capitals since this makes your comment hard to read.